in2m-logo A jam-packed car full of gifts; holiday parties; traveling cross-country to visit loves ones – consumers spend more money in the three months before New Year’s than any other time of the year. In fact, retailers often make about half of their annual profit during this time, according to the National Retail Merchants’ Association.

Unfortunately, much of the buying will be done on credit. Many people get so carried away during the holiday spending season that they can’t dig themselves out for months or years. With the holidays quickly approaching, now is the time to think about how you will pay for gifts, decorations and everything that comes with the season.

Steven Smith, spending management expert and In2M CEO, recommends the following tips to achieving a debt-free holiday.

  • Create a holiday spending plan NOW. Create an envelope-based budgeting system to allocate funds for every holiday expense this season. Literally, assign each person or expense (entertaining, home decorations, special occasion attire, etc.) an envelope. This can be done with a cash-based envelope system or with an online budget system like Mvelopes ® Personal. Determine the amount you can afford to spend for that envelope and write it on the envelope. If you must go over the amount allocated to the envelope, you are faced with the choice to take funds from another envelope or rethink that expense.
  • Shop for bargains, and shop early. The Internet has lots of great deals. And many of the best deals to be had in the stores are before the shopping season kicks off.
  • Don’t wander off track. Emotions sometimes get in the way of good judgment when shopping for loved ones and friends. While it’s terrific you want to give only the best, stick with the amount allocated to each “envelope” for those on your gift list.
  • Get creative with gift giving. Many times, the best gifts are the ones that require little or no money. Whether it’s baked goods, a grandchild’s one-of-a-kind art piece or simply an IOU certificate for a house cleaning there are many opportunities to save money during the holidays without sacrificing anyone on your list.
  • Use credit cards wisely. There is no quicker way to ruin your holiday spirit than to realize you have to pay for all those purchases over the next six months to a year. Credit Cards should only be used when you know that you can fully pay them off during the next month, with money that is already set aside for this purpose. Otherwise, when you calculate the finance charges, you practically double the cost of each item.

Steven B. Smith is chairman, president and chief executive officer of In2M Corporation, a financial software and services company and the developer of Mvelopes Personal – an online budgeting system. For the past fifteen years, he has been actively involved in assisting and educating people in personal and small business financial management. Smith holds a finance degree from the University of Utah.